Overview: Noni B Limited (“Noni B”, “the Company”) is an Australian retail company focused on women’s clothing apparel and accessories. Noni B owns a portfolio of retail clothing brands distributed via a network of 1,350 stores as well as an online presence. Earlier this year, Noni B announced the acquisition of five additional brands – including Millers, Katies, Crossroads, Rivers, and Autographs – expanding its total portfolio to 9 brands. The Company was founded in 1977.
Catalysts: The recently acquired brand portfolio significantly increases Noni B’s footprint and the Company is now focused on replicating the successful integration of Pretty Girl Fashion Group in 2016. Realising synergies and expanding margins could drive returns and add to recent earnings momentum with the Company on track to announce substantial EBITDA growth for a second consecutive year. A strong balance sheet and continuation of the recent trajectory could trigger further capital management initiatives.
Hurdles: The acquisitions have incurred combined EBITDA losses totalling
$6.2m for CY17 and there is no guarantee that projected synergies can be realised. While most retail providers continue to downsize their store footprint, Noni B’s expansion strategy could be a risk as ongoing like-for-like sales growth is not assured. The Company operates in a highly competitive sector and may be subject to increasing competition.
Investment View: Noni B offers profitable exposure to demand for clothing apparel. We are attracted to the Company’s recent growth trajectory and track record of turning around underperforming assets. Hurdles include integration risks and competition. Following a period of sustained headwinds, dividend distributions were reinstated in FY17 as restructuring initiatives delivered tangible results. Backed by major shareholder Alceon, the successful integration of recently announced acquisitions is projected to treble revenues in FY19. Continuation of the recent growth trajectory could result in further capital management initiatives and drive shareholder value. We initiate coverage with a ‘buy’ recommendation to monitor the Company’s ability to ‘buck the trend’ of underperforming retailers.
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